CDFI Fund Bond Guarantee Program

Transcription

1 CDFI Fund Bond Guarantee Program March 21, 2013 Drew Marlar Kutak Rock LLP Leslie Powell Kutak Rock LLP Chuck Shimer Kutak Rock LLP 1

2 CDFI Fund Bond Guarantee Program Agenda Program Overview/Key Characteristics Deal Structure Eligible Purposes Timing Requirements Next Steps Links Interim Rule pdf CDFI Fund Bond Guarantee Program 2

3 CDFI Fund Bond Guarantee Program Interim Rule February 5, 2013 Comments Due April 8, 2013 Training Sessions February 2013 Notice of Guarantee Availability, Applications and Document Templates TBD 3

4 CDFI Fund Bond Guarantee Program Federal Financing Bank will purchase bonds issued by Qualified Issuers Bonds are 100% guaranteed by the U.S. Department of Treasury Qualified Issuers then loan the Bond Proceeds to Eligible Community Development Financial Institutions ( CDFIs ) Loan is on a draw-down basis Eligible CDFIs re-loan the funds to Secondary Borrowers Secondary Borrowers can be CDFIs or any other developer/borrower for eligible community and economic development projects 4

5 Key Characteristics Each Bond Issue must be a minimum amount of $100 million and have a maturity of 30 years or less Each Bond Loan from a Qualified Issuer to an Eligible CDFI must be a minimum amount of $10 million A Qualified Issuer will issue Bonds to the FFB on behalf of its pool of Eligible CDFIs The closing of the Bond Issue and Bond Loans will occur simultaneously Disbursement of Bond Loan proceeds will be on a drawdown basis after Eligible CDFIs execute Secondary Loan Agreements 5

6 CDFI Fund Bond Guarantee Program: Deal Structure Department of the Treasury/ CDFI Fund Agreement to Guarantee Qualified Issuer Guarantee Federal Financing Bank Program Financing Agreement Bond Purchase Agreement Bond Proceeds Bond Program Admin Servicer Repayment Master Servicer/Trustee Loan Payments Release of Relending Funds Bond Loan Agreement Repayment Bond Loan Eligible Eligible CDFIs CDFIs Eligible CDFIs Loan Proceeds or Relending Funds Promissory Notes Secondary Loan Agreement(s) Eligible CDFIs Eligible CDFIs Secondary Borrowers 6

7 Deal Structure: Key Participants Federal Financing Bank Agrees to purchase Bonds on the Bond Issue Date Releases Bond Proceeds on a draw-down basis Department of the Treasury Provides 100% guarantee of the Bonds (Principal, Interest & Call Premiums) Qualified Issuer Must be: Either a Certified CDFI; or Designee of a Certified CDFI Issues the Bonds and serves as Program Administrator/Servicer Loans Bond Proceeds to Eligible CDFIs 7

8 Deal Structure: Key Participants Eligible CDFI Must be approved by the CDFI Fund and possess financial strength and sound credit attributes (recourse liability) Performs necessary loan underwriting, administration and servicing for Secondary Loans Secondary Borrower Recipient of a Secondary Loan from an Eligible CDFI Master Servicer/Trustee Oversees the servicing of the Bond Loans between the Qualified Issuers and the Eligible CDFIs Serves as Trustee holds Bond and Loan funds and accounts 8

9 Eligible Purposes Community and economic development purposes in low-income (no more than 80% area median income) or underserved rural areas: Commercial facilities that promote revitalization, community stability, or job creation or retention; Businesses that provide jobs for low-income people or are owned by low-income people; or enhance the availability of products and services to low-income people; Community facilities; Providing basic financial services; Affordable housing; Charter schools; and Refinance existing debt originally issued for an Eligible Purpose 9

10 Eligible Uses Eligible CDFIs may use Bond Loans to: Prefund one monthly installment of Bond Loan payments Pay Bond Issuance Fees Up to 1% of Bond Loan proceeds Capitalize Loan Loss Reserves Up to 5% of Bond Loan proceeds Repayments due on Secondary Loans in excess of debt service may be used for relending 10

11 Interest Rate and Costs Bond Interest Rate Fixed Rate: Liquidity Spread - Set at Bond Issue Date 30-Year Treasury - Set at each disbursement of Bond Proceeds Example: Bond Issue Date on 12/1/2013 Liquidity Spread.375% Disbursement on 2/1/ Year Treasury 3.22% Total Interest Rate 3.595% Secondary Loan Interest Rate Fixed Rate: Additional spread set by Eligible CDFIs Risk-Share Pool 3% of Bond Loan amount Funded at each disbursement Cannot use Bond Loan proceeds 11

12 Bond Issuance: Requirements and Timing 100% Disbursement of Secondary Loans 50% Commitment of Secondary Loans 100% Commitment of Secondary Loans Bond Issue Date* 12 Months 24 Months 60 Months * Dry closing of 100 % of a Qualified Issuer s Bonds and Bond Loans 12

13 What is next? Congressional Budgetary Approval Publication of the Notice of Guarantee Availability ( NOGA ) Qualified Issuer Applications and Guarantee Applications will be accepted following publication of the NOGA Guarantee Applications must include comprehensive plan for lending Bond Proceeds CDFI Fund must allocate funds for FY 2013 by September 30, 2013, for FY 2014 by September 30,

14 CDFI Fund Bond Guarantee Program March 21, 2013 Drew Marlar Kutak Rock LLP (404) Leslie Powell Kutak Rock LLP (404) Chuck Shimer Kutak Rock LLP (804)